CMS Cuts Medicare Part B 340B Drug Reimbursement in Hospital Outpatient Departments by Nearly 30 Percent

By , Published On: November 3, 2017

On November 1, 2017, the Centers for Medicare & Medicaid Services (CMS) finalized the Hospital Outpatient Prospective Payment System (HOPPS) Final Rule for 2018.  The Final Rule retains a controversial proposal to cut Medicare Part B drug reimbursement for products purchased under the 340B Program and billed through the HOPPS.  Currently, Medicare Part B provides separate reimbursement for “nonpass-through drugs” (e.g. clotting factors, biologicals, and radiopharmaceuticals) at the Average Sales Price (ASP) plus 6 percent. Under the Final Rule, separately reimbursable drugs purchased under the 340B Program will be reduced by almost 30 percent, to ASP minus 22.5 percent.  This provision of the Final Rule takes effect on January 1, 2018.

The reimbursement change does not affect federally-qualified health centers (FQHCs) or other 340B Program covered entities which are not hospital-based.  The Final Rule does not affect Medicare Part B drug reimbursement outside of hospitals and hospital-based sites, which is typically determined under the Medicare Physician Fee Schedule.  The rule also exempts children’s hospitals, free-standing cancer hospitals, and sole community hospitals, but CMS might include those hospitals in the future.  The rule also does not affect reimbursement at “non-excepted off-campus” hospital sites, which are treated like physician offices under Section 603 of the Bipartisan Budget Act of 2015.

However, the reimbursement changes could deeply impact hospitals and hospital-based providers, including certain hemophilia treatment centers, which participate in the 340B Program and provide services involving physician-administered drugs like chemotherapy and treatment of rheumatoid arthritis. CMS estimates the reimbursement change will save the Medicare program $1.6 billion, which will be redistributed to other non-drug services under the HOPPS.  Hospital stakeholders reacted swiftly, needing less than a day after the Final Rule was published to announce publicly that they will pursue litigation to prevent the reductions in reimbursement from moving forward.

If your organization has concerns about the Final Rule or you would like to learn more, contact Jason Reddish, Michael Glomb, or the Feldesman Tucker attorney with whom you usually work.  Follow us on Twitter and Facebook for more updates.